UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
February 27, 2018
(Date of earliest event reported)
LABORATORY CORPORATION OF
AMERICA HOLDINGS
(Exact Name of Registrant as Specified in its Charter)
Delaware | 1-11353 | 13-3757370 | ||
(State or other jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
358 South Main Street, | ||||
Burlington, North Carolina | 27215 | 336-229-1127 | ||
(Address of principal executive offices) | (Zip Code) | (Registrant’s telephone number including area code) | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] | Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 7.01 | Regulation FD Disclosure |
Summary information of the Company dated February 28, 2018.
Exhibit Index | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
LABORATORY CORPORATION OF AMERICA HOLDINGS
Registrant
By: | /s/ F. SAMUEL EBERTS III | |
F. Samuel Eberts III | ||
Chief Legal Officer and Secretary | ||
February 27, 2018
Investor and Analyst Day
February 2018
2
Forward Looking Statement
and Use of Adjusted Measures
This presentation contains forward-looking statements including but not limited to statements with respect to estimated 2018 guidance and the related
assumptions, the impact of various factors on operating and financial results, expected savings and synergies (including from the LaunchPad initiative and as
a result of acquisitions), and the opportunities for future growth.
This presentation contains forward-looking statements which are subject to change based on various important factors, including without limitation,
competitive actions and other unforeseen changes and general uncertainties in the marketplace, changes in government regulations, including health care
reform, customer purchasing decisions, including changes in payer regulations or policies, other adverse actions of governmental and third-party payers,
changes in testing guidelines or recommendations, adverse results in material litigation matters, the impact of changes in tax laws and regulations, failure to
maintain or develop customer relationships, our ability to develop or acquire new products and adapt to technological changes, failures in information
technology systems or data security, challenges in implementing business process changes, employee relations, and the effect of exchange rate fluctuations
on international operations.
Actual results could differ materially from those suggested by these forward-looking statements. The Company has no obligation to provide any updates to
these forward-looking statements even if its expectations change. Further information on potential factors, risks and uncertainties that could affect the
operating and financial results of Laboratory Corporation of America Holdings (the “Company”) is included in the Company’s Form 10-K for the year ended
December 31, 2016, and subsequent Forms 10-Q, including in each case under the heading risk factors, and in the Company’s other filings with the SEC.
This presentation contains “adjusted” financial information that has not been prepared in accordance with GAAP, including Adjusted EPS, and Free Cash
Flow, and certain segment information. The Company believes these adjusted measures are useful to investors as a supplement to, but not as a substitute
for, GAAP measures, in evaluating the Company’s operational performance. The Company further believes that the use of these non-GAAP financial
measures provides an additional tool for investors in evaluating operating results and trends, and growth and shareholder returns, as well as in comparing
the Company’s financial results with the financial results of other companies. However, the Company notes that these adjusted measures may be different
from and not directly comparable to the measures presented by other companies. Reconciliations of these non-GAAP measures to the most comparable
GAAP measures are included in this presentation.
Dave King
Chairman and Chief Executive Officer
Enterprise
Strategic Overview
Who We Are
Our Mission is to
Improve Health and
Improve Lives
LabCorp is
a Leading Global Life Sciences Company
that is deeply integrated
in guiding patient care
Our Strategic Objectives are to:
Deliver World-Class Diagnostics
Bring Innovative Medicines to Patients Faster
Use Technology to Improve the Delivery of Care
4
A Sound Foundation Supports the Combination
1
Creates powerful life sciences
enterprise with a market
opportunity of over $200 billion
3
2
Expands growth opportunities
for Diagnostics and Drug
Development businesses
Capitalizes on strengths to create
a differentiated offering
5
Opens Attractive Growth Opportunities
Across Multiple Global Markets
U.S. Clinical Lab
Testing Market
~$80 billion
Global Addressable
Outsourced R&D Spend
~$35 billion
Global Addressable Market
~$200 billion
LH
Ex-U.S. Clinical
Lab Testing Market
~$100 billion
Ex-U.S. Clinical Lab
Opportunity
LH(1)
~9%
Source: Industry reports and company estimates
1. Includes 12-month estimate of Chiltern revenue on a proforma basis
~10% ~5%
Leadership in Large, Growing, Fragmented Markets
LH(1)
U.S. Clinical Lab
Opportunity
Global CRO
Opportunity
LabCorp Enterprise Growth
Opportunity
6
Creates a Differentiated Offering
to Better Serve All Healthcare Stakeholders
7
• Patient database reaching
~50% of U.S. population
• Proprietary data sets with
>30 billion lab test results
across a growing menu of
nearly 5,000 assays
• Broad physician, health system
and managed care relationships
• Consumer engagement through
~1,900 PSC/retail locations,
5,000+ in-office phlebotomists
• Proprietary decision-support
and reporting tools
• Serving the top 20 biopharma
• Serving high-growth emerging
and mid-market segments
through Chiltern
• Working on ~50% of clinical trials
• >175,000 unique investigators
• Involved in all top 50 best-selling
drugs on the market
• Supported 70% of all CDx on the
market today
• Robust technology suite for trial
planning and execution
• Global footprint with business in
127 countries; 60,000 employees
• Unmatched real-world data and
patient intelligence
• Deep scientific and therapeutic
experience
• Leader in Companion Diagnostics
(CDx)
• Innovative technology-enabled
solutions for customers
LabCorp Diagnostics Covance Drug Development
2018 Priorities
Drive Profitable
Growth
Optimize Enterprise
Margins
Integrate Key
Acquisitions
8
Transition to
Value-Based Care
Enhance the
Drug Development Process
Embrace the Role
of the Consumer
• Improve efficiency in care delivery
• Reduce the overall cost of patient
care
• Utilize advanced tools and
analytics to deliver better
outcomes via personalized
medicine and population health
• Address increased trial
complexity, and competition for
patients and investigators
• Greater need for scalable tools
and processes to initiate and
manage trials
• Increased sponsor demand for
data-driven study design and
execution, as well as access to
relevant analytes, biomarkers
and tests
• Increased interest in and influence
over healthcare decision-making
• Technology advances driving
expectation of convenience
• Consumer satisfaction increasingly
important to other healthcare
stakeholders
Strategic Initiatives to Capitalize
on Long-term Market Opportunities
9
28%
Patients Seen in Denver
LabCorp at Walgreens
2016
>$200 million
2017
~$500 million
Value-Based Care Solutions Streamlining Clinical Studies Consumer Platform
Completed
3 marquee transactions
in 2017
Cumulative new orders won through
the combination of LabCorp patient
data and Covance capabilities:
On track to deliver $150 million
in cumulative new revenue from the
acquisition of Covance through 2018
Patients new
to LabCorp
LabCorp PSCs in
Walgreens stores are
attracting new patients
Reference
Laboratory
Testing
Outreach
Laboratory
Testing
Inpatient
Laboratory
Management
PAML and
its Joint
Venture
Interests
Mount Sinai
Health
System
Novant
Health
Differentiated Solutions
are Resonating with Customers
10
Creates Long-term Shareholder Value
$4.1
$4.5 $4.7
$5.0
$5.5 $5.7 $5.8
$6.0
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
$8.5
$9.4
$10.4
$2.3
$2.8
$3.6
$6.2 $6.6
$6.9
(1) 2007-2014 revenues excludes Covance results. 2008 revenue includes a $7.5 million adjustment relating to certain historic overpayments made by Medicare for claims submitted by a subsidiary of the Company
(2) Includes the estimated impact from adoption of the new revenue recognition accounting standard (ASC 606). See Appendix for details of the preliminary reconciliation of 2017 results
10-Year CAGR: 10%
• Record revenue of $10.2B
• Record EPS of $9.60
• Record free cash flow of $1.1B
• 24% increase in share price
Record 2017 Results
2018 FORTUNE World’s Most Admired Companies
2017 FORBES World’s Most Innovative Companies
Drug Development Diagnostics
(In Billions)
Revenue(1)
(2)
11
LabCorp is Well Positioned for Future Growth
Financial Strength
and Flexibility
Quality and Service Stable and
Global Business
Innovation Multiple Avenues
for Future Growth
12
John Ratliff
Chief Executive Officer,
Covance Drug Development
Jonathan Koch
Group President of Clinical Development
and Commercialization Services,
Covance Drug Development
Covance Drug Development
Strategic Overview
14
The Drug Development Landscape
Strong Market Trends and Client Demand
Improving regulatory environment Venture funding remains solid
Significant innovation in emerging biotech segment
Total Molecules
8,837
Total Molecules
11,197
Total Molecules
12,500
Total Molecules
13,454
Strong therapeutic growth, especially in oncology
3% 8% 9% 11%
29%
31% 31%
36%
13% 3% 4%
6%
55% 58% 56%
47%
2013 2015 2016 2017
Other
Cardiovascular &
Metabolic Disorders
Oncology
Rare Diseases
15
2017: A Transformative Year
Addressing Challenges and Positioning for Growth
Talented Team, Enhanced Capabilities, Process Efficiency
Enhanced Tools
and Technology
Chiltern
Integrated
Capabilities
Deeper Executive
Talent Bench and
International
Expansion
Book to Bill
1.36
LaunchPad
Business
Process
Improvement
Initiatives
Key Solution
Launches
(Companion
Diagnostics,
Biomarkers,
Biotech, etc.)
EXTRAORDINARY
POTENTIAL
EXCEPTIONAL
PEOPLE
ENERGIZING
PURPOSE
16
Covance Growth Strategy
Leveraging LabCorp/Covance Combined Strength, Utilizing Market Leading Assets,
Demonstrating Clinical Leadership, Maximizing Tools and Technology
NOW
Strengthen
& Expand
NEXT
Grow & Deepen
NEEDED
Evolve & Lead
►Broaden Scientific Leadership
► Increase Patient-Centered Solutions
►Expand Core Services
►Portfolio Management and
Monitoring
►Create Best-in-Class Patient Recruitment
and Site Management Through Data
►Expand Global Delivery
► Launch Biotech Differentiated Offering
►Enter Adjacent Markets
► Lead Virtualization of
Clinical Trials
►Apply Patient-Centric
Technologies
►Embrace Alliances with
New Partners
►Evolve Informatics and Analytics
IMPROVE HEALTH, IMPROVE LIVES
ADVANTAGES: SCIENCE PATIENT CENTRICITY LOGISTICS DATA
DISCOVERY DEVELOPMENT COMMERCIALIZATION
Research Preclinical Phase I Phase II Phase III Phase IV RWE
GROWTH
STRATEGY
EMPLOYEES
PATIENTS
INVESTORS
CUSTOMERS
17
Leveraging LabCorp-Covance Combined Strength
Unique Offerings and Differentiated Value
Patient-Centered
Solutions
and Data Insights
Scientific
Collaboration
(e.g., Companion Diagnostics,
Real World Evidence)
LaunchPad
Business Process
Improvement
Initiatives
18
Leveraging LabCorp-Covance Combined Strength
Unique Patient-Centered Solutions and Data Insights
Empowered patients are
searching for treatment
alternatives and choosing
to participate in clinical
studies
Real world data is used to find the right patients for a
clinical study
Matching patients’ physicians who have a pre-existing
relationship with LabCorp enables more meaningful
conversations
Known Covance investigators are identified around
clusters of matching patients
The data identifies where the
patients are, who they are, and
who their physicians are
Covance can reach out to patients
directly, as well as contact
physicians to inform them about
specific patients who may be
eligible for a given study
Granular, structured,
real world lab data
is collected and
readily available for
Covance’s use
Empowered Patients
“Choosing to participate”
Real World Lab Data
Largest in the world
The Right Patient
LabCorp Data, Investigators
Matched Patients
Who and where they are…
19
Leveraging LabCorp-Covance Combined Strength
Holistic Approach to Patient Intelligence
Protocols /
Trial Insights /
Clinical Labs Data
LabCorp
Patient Data
Patient Survey /
Voice of Patient
► ~115 million patient encounters annually
► ~1,900 patient service centers
► High-quality data, including diagnosis
codes, demographics and lab results
► Covance supports ~50% of all clinical trials
► >50 million global patient lab results per year
from central lab network
Patient
Intelligence
► >200,000 patients have requested to be notified
by Covance about relevant clinical studies;
focused on increasing participation rate
► Obtaining actionable patient insights regarding
trial participation
20
Leveraging LabCorp-Covance Combined Strength
Scientific Collaboration with Market Leading Companion Diagnostics (CDx) Capabilities
► Supported more than 300 CDx, in vitro diagnostic and medical device studies
► Collaborated with over 40 clients on more than 165 CDx projects in 2017
► CDx-related net orders grew ~4x from 2015 to $244M in 2017
► ~$135M in CDx-related enterprise revenue in 2017; 3-year CAGR of ~20%
Drug
Development
Biomarker/CDx
Development
Biomarker
Development
CDx Assay
& Feasibility
CDx Development
& Validation
Regulatory Submission
& CDx Launch
Preclinical Phase I Phase II Phase III
NDA
Submission
Covance Provides Comprehensive CDx Solutions For The Drug Life Cycle
Commercialization
21
Utilizing Market Leading Assets
As an Example… Central Laboratory Services
Expanding Clinical Capabilities
Stronger Together with Chiltern
Presence
• Broad customer base with strong growth potential
across all segments
Therapeutic Capabilities
• Broad therapeutic offering across all phases of
development
• The most experienced central laboratory
(e.g., biomarkers, companion diagnostics)
Informatics
• Clinical analytics and FSP capabilities and suite of
technology offerings (Xcellerate® and Endpoint IVR)
People
• Global employee enhancement
• Dedicated teams
• Collaborative engagement
• Personalized attention
• Data aggregation and insight
• Deep therapeutic and scientific expertise
Combined Offering Delivers Value Biotech: Delivering A Differentiated Experience
• Early Phase Development
Solutions
• Phase I Sites/Adaptive
Design
• Phase I-IV
• Biomarkers/CDx
• Central Lab/Esoteric
testing
• Consulting Regulatory
Commercial
• Covance MarketPlace
• Xcellerate
Providing Industry Leading Breadth of Solutions
22
23
LaunchPad Business Process Improvement Initiative
Re-engineering Processes and Integrating New Technology to Drive Margin Expansion
Net Savings: $20M in 2017, and additional $130M over three years ending in 2020
After achieving $100M in cost synergies from LabCorp's acquisition of Covance
Talent and Asset
Optimization
Process Discipline
and Productivity
Delivery
Transformation
Customer
Centricity
• Process and system
improvements
• Culture of continuous
process improvement
• Aligning people and
capabilities with client
expectations
• Optimizing the global
footprint
• Transforming the delivery of
clinical studies and lab
services
• Positioning the company for
the future of clinical trials
• “Customer First” mindset
• Driving growth and loyalty
through customer-centric
investment
• Global service delivery model
(GSDM)
• Organizational design to enable
seamless distribution of work
globally
• Real estate consolidation
• Commercial process investments
and improvements
• Differentiated, integrated
solutions from Chiltern
acquisition
• Software-enabled process automation
• Rollout of new technology platforms
Reduces the time,
cost and risk of
specimen based
research.
24
Maximizing Tools and Technologies
Innovative Solutions Focused on Client Needs
Contributed to $1B+ of Revenue Across Clinical Development in 2017
Key Takeaways
25
Diagnostics and Drug Development combination creates differentiation from
competition through data, patient intelligence, and scientific collaboration
Transformative investments in talent, solutions, and technology
positioning Covance for growth
Strong book to bill of 1.36 and backlog of over $7.1B driving year-on-
year revenue growth of 20% - 24% (mid to high single digit organic
growth), including improved margins over the next 3 years
LabCorp Diagnostics
Strategic Overview
Gary Huff
Chief Executive Officer,
LabCorp Diagnostics
27
LabCorp Diagnostics At-a-Glance
Expertise
• Unmatched depth and breadth of solutions
• Scientific, therapeutic, value-based care
and IT expertise
• Experienced senior leadership
• 11 Centers of Excellence
• ~600 M.D. and Ph.D.
Financial Strength
• Significant free cash flow
• Stable business with history of performance
• >$7 billion in revenue in 2017; 10-year revenue
CAGR of ~6%
• Hundreds of thousands of client relationships
• ~1,600 managed care contracts
Market Position
• Leading scientific innovation and ability to
partner and acquire expertise
• Value creation with diagnostics and
drug development combination
Why customers
choose LabCorp
• We lower cost and
improve quality
• We create value
with the
combination of
Diagnostics and
Drug Development
• We are focused on
providing an
exceptional
experience
Infrastructure
• Strong U.S. infrastructure
• ~1,900 Patient Service Centers
• Extensive test menu, including esoteric
offering
• 3,100 couriers
• ~50% of U.S. population in patient database
• >65,000 digital interfaces
28
Creating Differentiated Value
for our Consumers, Customers, and Employees
Multiple Growth Opportunities
• Health systems and hospitals
• Managed care
• Independent physicians
• Companion diagnostics
Data Powerhouse with IT Expertise
• ~50% of U.S population / >30 billion lab test results
• Big data platform
• Interfaces with over 600 EMR and laboratory
information systems (LIS) vendors
• Holistic approach to patient engagement, including
mobile
Continual Innovation
• Venture investments
• Walgreens retail health partnership
• Proprietary technology to enhance the consumer
experience
• 100 new tests per year (on average)
Leadership
• Talented leadership, track record of execution
• Scientific strength
• Consistent, profitable growth
• Structured to be close to the customer
29
Leadership in a
Stable, Growing, and Fragmented Market
LabCorp,
$7B
Quest
Diagnostics,
$8B
Independent
Labs,
$13B
Hospital Labs,
$47B
Physician Office
Labs,
$4B
Independent
Labs,
$13B
Hospital Labs,
$47B
Physician Office
Labs, $4B
Market
dynamics are
creating
opportunity
$27B Inpatient &
Outpatient (1)
$17B Outreach
$3B Reference
~$80 billion
U.S. Lab Market
Historically difficult
to penetrate
(1) Generally reimbursed as part of a bundled payment
Hospital Lab
Testing Market
Well-Positioned to Capture the Addressable Market
Physician Office Labs Hospital Outreach and
Reference Labs
Independent Labs
Addressable
Market
$37B
Driving
Profitable
Growth
Deliver innovative
value-based care
solutions
Accretive and
strategic acquisitions
Value creation through
diagnostics and drug
development combination
1 2 3
$4B
$20B $13B
30
31
Multiple Industry Dynamics
Play to LabCorp’s Strengths
Consumerism
• Consumers are taking greater responsibility
for their wellness and healthcare
• Demand low cost, high quality, access
and technology
• Access: Partner with health retailers
• Convenience: consumer initiated programs
and in-home testing
Scientific Innovation
• Personalized medicine guiding
new approaches
• Next generation sequencing
capability
• OmniSeq partnership for
molecular profiling to improve
cancer treatment
Technological Innovation
• Technologies are developing rapidly
and require capital to employ
• Big data platforms needed to connect
information from disparate sources
• EHR data fed into analytics platform
for predictive learning
Pricing Pressure
• Insurers are focused on driving
utilization to low-cost site of care
• National scale enables low-cost
position
• Automation and standardization
provide industry-leading
operational efficiency
Drive Profitable Growth
32
Optimize Opportunities
− Acquisition Integration
− Bad Debt Improvement
− LabCorp at Walgreens Expansion
1.
2.
2018 Diagnostics Priorities
33
Driving Growth Through
Focus on Key Customer and Testing Segments
Accretive and
strategic
acquisitions
Leverage
combination
of diagnostics
and drug
development
Deliver
innovative
value-based
care solutions
How Will We Grow? Smart Growth
Customer Segments Testing Segments
Physician Groups
Managed Care Health Systems
Consumers
Genetics Oncology
Medical Drug
Monitoring
Women’s
Health
Rare and
Orphan Diseases
34
Utilizing Technological Innovation to Improve
Care, Lower Cost and Enhance Experiences
Improve Care
• Value-based care
solutions and tools
• Laboratory analytics and
decision support tools
1 Lower Cost, Improve Quality 2 Enhance Experiences 3
• Automation expansion,
including Propel
• Standardization
• IT connectivity
• Roll-out of consumer
self-service tools
• Meet patients where
they want to be met
• Price transparency
35
Key Takeaways
Well-positioned for long-term profitable growth through our differentiated
laboratory solutions and combination with Drug Development capabilities
Committed to quality, service and innovative solutions providing the
foundation for new and deeper collaborations with customers
Lab market undergoing unprecedented changes driven by consumerism,
scientific and technological innovation, as well as price pressure
Brian Caveney, M.D.
Chief Medical Officer
Bryan Vaughn
Senior Vice President, Health Systems,
LabCorp Diagnostics
Broad Capabilities that Support the
Transition to Value-Based Care
37
Value-Based Care is an Evolution
Health Systems
Deep, innovative partnerships
Clinicians
Efficient workflow, timely information
Payers
Data sharing, provider collaboration
The transition is complex and iterative
Accurate and timely diagnoses play a critical role
Fee-for-
service
Value-
based
38
Uniquely Positioned to Succeed
in Value-Based Care
Powered by standardized lab systems and data, flexible data interfaces and feeds, and technology-enabled tools
Lower Cost of Utilization
• Managed care networks, benefits
• Health system partnerships
• Consumer empowerment
Right Test, Right Patient
• Smart test design (i.e., cascades)
• M.D., Ph.D. access
• Cover gaps in care
• Result trending, global
result search
Beyond Lab Testing
• CDx, CaDx for optimal therapy
• Chronic disease programs with
clinical decision support
• Data supports care management
programs and population health
• Access to clinical trials
39
Offering Leading, Broad-Based Solutions
in Value-Based Care
Leading Laboratory Services
• National access
• Comprehensive test menu
• Sales and service organization
• Scientific innovation
• Power of scale
Payer and Provider Collaboration
• Help stakeholders achieve total cost of care
metrics in value-based care contracts
• Actionable lab results
• Global patient results data
• MACRA, HEDIS, and ACO quality metrics
• Care Intelligence® population health
Clinical Decision Support
• Programs on key disease states
• Lab reports support care guidelines
• Developed by physicians
• Data monitoring drives
cost-effective care management
Drug Development Solutions
• Companion diagnostics leadership
• Potential provider revenue stream from
increased participation in clinical trials
• Cost savings to patients and payers
• “Real World” data
40
Actionable Data for Every Stakeholder
Providers
• Identifies untreated problems
• Patient-specific recommendations
based on current guidelines /
standards of care delivered with
lab results
Payers
• Targeted data feeds
• Lower overall medical
expenses through earlier
disease identification
Patients
• Educate patients about what
their lab results mean
• Empower patients to
participate in their own care
• Condition-specific care plans
Care Management
Team
• Real-time targeting of high
risk patients
• Highlight outliers and likely
gaps in care
• Metrics on provider
performance
41
Driving Value Through Broad-Based
Partnerships with Health Systems
Highly Efficient
Lab Provider
Positioned for
value-based care
and consumer
driven future
Redeploy
Capital, IT, Time
Clinical Trials
Participation
Innovation
Leverage Quality,
Programs and Tools
Simplification and
Standardization
42
Health Systems Opportunity
Value-based care will drive today’s fee-for-service
settings to look more like cost centers
Hospitals Post-acute Alt Sites Specialists Primary Care
$47B Hospital Labs
$4B Physician Office
Labs
Multi-billion dollar
opportunity in health system
partnerships driven by
LabCorp’s low-cost, high-
quality market position
PAMA and new technology will drive
unprecedented transparency
43
Major Academic Health System Case Study
Case Study
Multi-faceted relationship with Mount Sinai Health System
Outreach Acquisition
• Divesture of non-core asset
• Gained square footage by
reducing infrastructure
Reference Testing
• Consolidation of lab
partners
• Reduces expense, IT, and
complexity
Data for Accountable Care
• Sharing standardized lab result
data to empower population health
• Innovative Hepatitis C awareness
and management program under
development
Academic Collaboration
• Carved out molecular /
genetics lab from
acquisition
• Support of residency
programs
Clinical Trials
• ↑ number of studies
offered by Covance
Financial Benefits
• Redeploy capital, space,
and IT resources
• Operations improvement through
efficiencies and trials
44
Innovation with Health Systems
to Help Improve Patient Care
45
Multi-Pronged Approach to Deliver Value
to an Accountable Care Organization (ACO)
Clinically integrated network with 240 physicians
Multiple EHRs, multiple value-based contracts
Case Study
Deployed Care
IntelligenceTM population
health tool
Standardized, timely
lab result data
High quality, cost
effective lab service
In 2016, for 16,000
commercial patients:
• $4.7M in total savings
• ↓ inpatient utilization 15%
• ↑ primary care visits
double digits in high risk
patients
• 90th percentile patient
satisfaction
High-cost and out-of-
network lab providers
High risk and rising risk
patient populations
Active patient
management
46
Key Takeaways
Developing innovative tools, technology and business models to
further our value proposition for patients and health systems
Supporting health systems’ transition to value-based care represents
a multi-billion dollar long-term growth opportunity
Uniquely positioned to succeed in value-based care by
lowering the cost of utilization, driving appropriate utilization,
and providing value beyond lab testing
Extending our Leadership in
Companion Diagnostics
Marcia Eisenberg, Ph.D.
Chief Scientific Officer,
LabCorp Diagnostics
Steven Anderson, Ph.D.
Chief Scientific Officer,
Covance Drug Development
48
Precision Medicine
and Companion Diagnostics (CDx)
21%
28% 27%
34%
2014 2015 2016 2017
Personalized Medicines Top 30% of FDA
Approvals for First Time in 2017(1)
Key Drivers in Precision Medicine
► Genomic and proteomic biomarkers are key features
of developing new therapies and diagnostics
• Define the disease biology
• Provide targets for new therapies
► A companion diagnostic is the ultimate biomarker test
• Co-developed and linked with a specific therapy
• Help identify patients most likely to respond
• Help identify patients who may have an adverse
event
• Provide added value for how the diagnostic and
therapy are used
(1) Source: Personalized Medicine Coalition.
Personalized Medicine at FDA: 2017 Progress Report.
49
Two Decades of Experience
with CDx Commercialization
1998 2002 2006 2012 2016 2017
Validation and
launch of
HerceptTest
First
commercial
launch of EGFR
Mutation
Analysis
Validation and
launch of ALK
for NSCLC
Launch of
COBAS EGFR
V2 Plasma
Launch of
Thermo
Fisher
Oncomine
Dx Target
Test
Validation
and launch of
BRAFV600E for
melanoma
Validation and
launch PD-L1
by IHC for
nivolumab and
pembrolizumab
in NSCLC
Covance /
LabCorp
CDx Facility
50
Unmatched Franchise Providing End-to-End Clinical
Development and Commercial Lab Testing Solutions
Commercialization
a t o r y
A pp r o v a l
Cli n i c a l
U t ili t y
Drug
Development
Biomarker/CDx
Development
Preclinical Phase I Phase II Phase III
NDA
Submission
Biomarker
Development
CDx Assay
& Feasibility
CDx Development
& Validation
Regulatory Submission
& CDx Launch
► Bench to commercialization expertise
► Leaders in both in vitro diagnostic (IVD) and single lab PMA regulatory approaches
► Experience with 300+ IVD and medical device studies
► Supported approximately 70% of all FDA approved companion diagnostics on the
market – including approvals for HER2, KRAS, EGFR, BRAF, ALK and PD-L1
• Recent examples in immuno-oncology, liquid biopsy and next generation sequencing
End-to-end capabilities are a differentiator for development, trial support and commercialization
51
Dedicated CDx Laboratory Combines
Unmatched Expertise with Leading Technology
► 36,000 sq. ft. facility in North Carolina
► Dedicated laboratory and staff for development, validation,
and transfer of CDx assays
• Focus on Genomics and Molecular Pathology
• Associated GMP manufacturing capabilities
Two CDx Solutions Enable Flexible
Collaboration with Customers
52
Pharma
IVD CRO
CDx
Partnership
Single Site Pathway (ssPMA)
► Faster route for development and commercialization
► Develop and validate test on established IVD platform
► Laboratory service provider also leads the regulatory
submission for regulatory clearance
► Initial launch as FDA-approved PMA IVD contingent on
intended use of marker
► May subsequently partner with IVD manufacturer for
kit development on same platform, allowing
decentralization of testing
Current projects are split 75% IVD partnership pathway and 25% ssPMA pathway,
with a growing interest in the ssPMA approach
IVD Pathway
53
Strong Demand for Companion Diagnostics
Will Drive Profitable Revenue Growth
$55
$106
$244
$0
$100
$200
$300
2015 2016 2017
$114
$153
$300
$0
$100
$200
$300
2015 2016 2017
CDx-Related Net Orders ($M) CDx-Related Backlog ($M)
End-to-End Support for a New Oncology
Therapy and Associated CDx Assay
54
For a recently approved immuno-oncology therapy, Covance and LabCorp Diagnostics
collaborated to provide five distinct drug development services:
Demonstration of end-to-end capabilities that are a differentiator in Companion Diagnostics Case Study
Drug Development
Preclinical Phase I Phase II Phase III
NDA
Submission Research Commercialization
Prepared drug to
go into man
(first in human dosing)
Covance BioPharm CMC
assisted in the manufacture
and qualification of drug lots
PK / PD support in early
Phase I studies
Covance pre-clinical
pharmacokinentic and
pharmacodynamic work
Biomarker evaluation
to enroll patients in
pivotal clinical trials
Covance Central Lab
expertise supporting
targeted clinical trial
participants
Commercialized assay
development
LabCorp Diagnostics
ensured that the diagnostic
was prepared and
commercially available
simultaneous with the
drug’s launch
Post-approval CMC
to verify quality of the
manufactured
product for its intended
audience
Comprehensive
commercial
strategy, including
global CDx
partnerships
Interest in and use
of the single site
PMA regulatory
approach drives
improvements in
efficiency,
flexibility and cost
Technological
advancements
enabled by
multiplexing, such
as Next
Generation
Sequencing, Gene
Expression
Profiling, and
Proteomics
Attractive
expansion of
client base –
collaborating with
mix of large
pharma, emerging
pharma and
biotech clients
Increasing interest
in precision
medicine and use
of biomarkers
extending beyond
oncology to other
therapeutic areas
Capitalizing on Multiple CDx Growth Drivers
55
Key Takeaways
56
An increasing focus on precision medicine, with expansion beyond
Oncology applications, provides a significant growth opportunity in CDx
Dedicated resources and flexible approaches to CDx development allow
Covance and LabCorp to provide solutions that meet client needs
LabCorp and Covance have an unsurpassed track record
in the development and commercialization of CDx assays
Break
Unmatched Data,
Powerful Insight
Lance Berberian
Chief Information Officer
Gabriela Feldberg
Head of Feasibility, Recruitment
and Engagement,
Covance Drug Development
59
Compelling Combination of Data and Tethered Relationships
is a Key Competitive Advantage for the Enterprise
Our Data
• Timely
• Standardized
• Precise
• Identified
Our Relationships
• Patients
• Physicians and Health Systems
• Investigators
• Pharmaceutical Companies
• EMR Providers
Actionable
• Assist with Closing Gaps in Care
• Recruit Patients Faster
• Design High Quality Trials
• Leverage Health System Data
• Support Precision Medicine
Goals
60
Covance Offers a Suite of Differentiated Drug
Development Tools for Trial Planning and Execution
• Metrics and
Benchmarking
• Trial Forecasting
• Clinical Data Hub
• Monitoring Solutions
• Data Management
• Insights
• GlobalCODE
• snapTRACK
• LabCODE
• Pulse
• Drive
cellerate®
61
LabCorp Diagnostics Offers Tools That
Serve Key Customer Segments
Service Physicians / Health Systems Consumers Payers / Managed Care
Guidance on Test Selection
Placement of Electronic Orders (Portal and EMR)
Mobile Optimized Reservations
Multi-Channel Check-In
Delivery of Electronic Test Reports (Portal and EMR)
Post-Analytical Clinical Decision Support
Population Health (Data Feeds and Tools)
Test Result Trending
Client Supplies Ordering
Online Invoice Payment
Hospital Reporting
Payer Reporting
Power of the LabCorp Data for Trial Design,
Site Selection, and Patient Recruitment
Real World Data
• Not biased and represents
people as they live with their
disease
• Patient data is granular and
identifiable
Vast Test Menu
• 30+ billion test results across
thousands of diagnostic assays
• >2.5 million samples collected
(>30% by LabCorp phlebotomists)
and processed weekly across many
diseases and therapeutic areas
Population Level Disease Analysis
• Surveillance of disease spread to
enable just in time recruitment
• Unlike other types of real world
data, lab data can be easily
accessed near real time
62
Covance supports ~50%
of all clinical trials
Power of the Xcellerate Investigator Database
Number of Patients
Date of First Patient In
Quality
Lab Cancellations and Queries
Standardized Site Rank
> 175,000 unique investigators
> 15,000 unique protocols
Investigator Performance
Database
63
Case Study
64
Covance Value Proposition
Exceeding Recruitment Goals for a Global Multi-Study Registration Program
UNIQUE SOLUTIONS CLIENT CHALLENGE
Randomize 2,700
patients within a
very narrow
timeframe for a
suite of registration
studies
Get all sites across
the globe up and
running as quickly
as possible
Leveraged Xcellerate® historical
investigator database to identify
and secure highest performing
investigators in indication
>175k
unique investigators
>15k
protocols
Based on extensive feasibility outreach
and site capacity assessment,
efficiencies were identified that allowed
effective overlapping of sites across the
program resulting in accelerated site
start-up and reduced clinical costs
Key Performance Result: Achieved “first patient in” requirement ahead of schedule for all studies in the program.
Beat historical industry performance across a number of key metrics:
18% fewer weeks from final protocol to FPI 75% more high-performing sites
31% more patients/site/month 41% fewer non-performing sites
Ulcerative Colitis Example
65
Understanding the Impact of Study Design
on the Available Patient Pool
51,814 patients between June 2016 and May 2017 identified
48,708 patients between 18 and 80 years old
20,288 without Crohn’s Disease, IBD and UC Proctitis
20,146 without Malignancy, Inherited Immuno Syndrome, TB and HIV/AIDS
20,075 without Hepatitis B and C
13,950 with all relevant labs populated
13,750 with Neutrophil value >= 1.5x10^9/L and Platelet >=100x10^9/L
13,552 with Hemoglobin >= 8.5g/dL and Lymphocyte >500 cells/uL
13,516 with Total WBC >=3.0 x 10^9/L and Serum Creatine <=2xULN
13,227 with Alk Phos <=2xULN and ALT <=2xULN
12,980 with AST <=2xULN and Bilirubin <=3xULN
The protocol inclusion / exclusion criteria
is applied to the patient pool and then
matching patients are geo-located on the
map
66
75%
reduction
Covance Data Insights Show
Workload of Key Investigators
# Active
Studies
#
Investigators
Patients Per
Investigator
9+ 28 72
5-8 63 33
4 123 87
2-3 169 15
1 644 10
0 27 11
• Objective site performance data around the globe which includes 8+ pharma programs and 53 active UC studies
• Creates immediate 963 sites for targeted outreach
• 27 out of 1,054 (3%) of known investigators are not in an active trial
• Investigator patient accrual per study drops as more studies are taken on – diminishing return from in-demand sites
67
Location of Covance Sites in Relation
to Ulcerative Colitis Patients
68
Sample from Seven UK GP Surgeries
BLUE DOTS – Crohn’s and UC Patients from EMR
SIZE OF BLUE DOTS – Number of Patients
STARS – Covance sites
COLOR OF STARS – Green high score to
red low score
DOTS – UC patients who match study design from LabCorp Real World Database
STARS – High performing Covance sites
Case Study
69
LabCorp/Covance Value Proposition
Protocol Design to Maximize Patient Enrollment Opportunity
UNIQUE SOLUTIONS CLIENT CHALLENGE
Result: The eligible patient population increased by more than 50%
without compromising the objectives of the trial
Study to test if a drug
reduced progression of
kidney disease in patients
with Type II diabetes
Analyzed LabCorp de-identified
patient data to discern whether
small protocol changes could
accelerate recruitment
Data helped to identify that
making minor changes to
the eGFR cutoff would increase
the patient pool size therefore
reducing recruitment timelines
>150
Million patients
>30
Billion test results
> Study was looking for a small subset of patients which represented
<7% of patients
70
LabCorp/Covance Value Proposition
Rescued Patient Enrollment for a Study of a Rare Mutation
Leveraged LabCorp database with
de-identified health information on
patients with the rare mutation
UNIQUE SOLUTIONS
Seeking patients with AML and
a rare genetic mutation
<15% of AML patients
CLIENT CHALLENGE
Result: With 274 sites across 28 countries, patient enrollment is on now on track for the initial
milestone and has regained its advantage in the recruitment competitive landscape
Difficulty identifying
available sites as
landscape changed
rapidly driving
increased
competition
Pharma’s
preferred
sites were
unavailable
Increased recruitment activities in
the US leveraging the LabCorp sales
force to reach out to physicians to
gauge interest as investigators and to
recruit AML patients
>150
Million patients
Case Study
Case Study
71
LabCorp/Covance Value Proposition
Piloting a Virtual Real World Evidence Study
Developed a cross-enterprise virtual study
model leveraging the Covance patient
support call center, local LabCorp Patient
Service Centers and Covance Central Labs to
screen participants, collect lab specimens
and analyze lab results, respectively
• Online screening, e-consent and
enrollment
• Call center acting as virtual site
coordinators
• Fully integrated project oversight and
data management
UNIQUE SOLUTIONS CLIENT CHALLENGE
Result: Conducted two successful pilot studies recruiting 315 patients across 65 Patient Service Centers.
The pharma company is planning to scale up 10x from the pilot to a full national model.
Develop a less costly,
“site-less” approach
to conduct a study
collecting survey and
laboratory data
65
LabCorp
Patient Service Centers
in the Pilot
Study needed to be
national in scope
while reducing the
patient travel burden
Setting Up for Long Term Success
72
Continuing to add real world data
sources to further accelerate patient
recruitment
Driving a higher volume of patients
through fewer sites by leveraging deep
relationships with key health systems
Utilizing LabCorp’s large network of
Patient Service Centers to conduct virtual
studies dramatically reduces the patient
burden
Leveraging rapidly growing LabCorp
patient database to gather actionable
patient insights to inform study design
and execution
Key Takeaways
73
Direct engagement through multiple channels with patients, physicians,
investigators, and health systems create a holistic data strategy
Significant ongoing investment in talent, technology and capabilities will
increase the power of our differentiated data and informatics
Unmatched combination of patient and investigator data,
which is the right data to guide the delivery of care, study design,
site selection and patient recruitment
Accelerating the Consumer
Innovation Platform
Tom Kaminski
Senior Vice President,
Corporate Strategy
Mark Wright
Senior Vice President, Customer Products,
LabCorp Diagnostics
75
44% 42%
28%
5% 2%
36%
33%
30%
7% 10%
17% 23%
33%
84% 84% Not sure
No Influence
Influence
Primary
2017 LabCorp Consumer Study
N=1,500
MOE +/- 2.5%
Who is involved in the decision on where to get your lab testing
(e.g. hospital lab vs. third-party commercial lab)
• Consumers are taking greater responsibility for their
wellness and healthcare
• Experiencing higher co-pays and deductibles,
consumers are increasingly influential in the decision
on where lab testing is performed
• Advances in technology drive expectation of
convenience
• Performing testing for >2.5 million consumers per
week and seeing >150,000 consumers per weekday
in person, LabCorp is uniquely positioned to engage
with health care consumers at scale
• Having diagnosis and test result information,
LabCorp has data and clinical expertise to engage
with consumers in a personalized manner
Why Focus on Patients as Consumers?
76
Organizing Around the Empowered Consumer
Convenient and
Flexible Options
“It is easy to get the lab testing
I want or need in the setting
that I choose.”
Access and Insights
“I understand my results in the
context of my overall health. I
manage my health information and
decide when and how to share it.”
Price Transparency
“I understand the relative prices
of different lab service providers
to make an informed choice.
I know what I will pay before I
receive services.”
Engagement
“I engage with the brand on my terms
and receive valuable, personalized
content. My feedback is heard and
acted upon.”
Consumer Engagement is a Priority
• Capturing e-mail and mobile phone numbers for LabCorp
consumers across multiple touch points to enable richer
engagement and customer satisfaction
• Continue to directly engage with patients through online
appointment scheduling, automated check-ins, as well as
electronic delivery of results and bills through LabCorp | Patient TM
• Engaging with consumers in new ways:
• Automatic reminders, service confirmations, and call back texts
when it is time to be serviced
• Real-time capture of feedback including Net Promoter Scoring
• Dedicated care team for consumers
• Feedback loop with employees
• Omni channel marketing and communication including social
media
• Relevant, valuable, personalized content
77
Seamless mobile experience
to make reservations,
automatically incorporating
demographic and insurance
information on file
78
LabCorp | PreCheck™
Streamlined
experience for patient
check-in with minimal
manual entry
79
LabCorp | Express™
Patient Out-of-Pocket Cost Estimates
• The estimator service is enabled
across the LabCorp PSC network and
for LabCorp in-office phlebotomists
• Estimates are customized for each
individual and health plan
• For select genetic testing, consumers
can obtain cost estimates online
without visiting a PSC
80
Every patient that
registers in
LabCorp | Patient™ is
given the opportunity
to participate in
research
LabCorp | Patient™
All test results
displayed in an
easy to read
and intuitive
visual plus official
report available
for download
81
82
LabCorp at Walgreens
LabCorp PSCs in
Walgreens stores are
attracting new patients
28%
18%
0%
10%
20%
30%
LabCorp at
Walgreens
PSCs
Comparable
LabCorp
PSCs
% of
patients
seen new
to LabCorp
83
Meeting Consumers Where They Want to be Met
Consumer genetics Telemedicine Home health
Moving Reliable Self-Collected
Testing to the Home
84
Illustrative
85
Key Takeaways
Consumer engagement is vital to Diagnostics, Drug Development,
and other key stakeholders (e.g., managed care, providers)
Deploying industry-leading technology-enabled solutions
will improve the consumer experience
Our consumer platform will continue to accelerate revenue growth
Finance Overview
Glenn Eisenberg
Chief Financial Officer
87
The LabCorp Playbook:
Delivering Long-Term Shareholder Value
Revenue Growth Margin Optimization
EPS Growth
Disciplined Capital
Deployment
Return Capital to
Shareholders
Capital
Expenditures
and Strategic
Acquisitions
Capital
Expenditures
and LaunchPad
Initiatives Strong Cash Flow
88
Track Record of Accelerating Growth
$6.0
$6.2 $6.6 $6.9
$7.1
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
2014 2015 2016 2017 2018
$2.3 $6.80
$7.91
$8.83
$9.60
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
2014 2015 2016 2017 2018
Revenue Adjusted EPS(3)
$11.50
$9.4
$10.4
$11.5
(In Billions)
$536
$727
$897
$1,147 $1,150
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
2014 2015 2016 2017 2018
(In Millions)
Free Cash Flow(4)
$8.5
2018 Guidance(1)
Midpoint 10.5%
(1) Guidance issued on February 6, 2017
(2) Includes the estimated impact from adoption of the new revenue recognition accounting standard (ASC 606). See Appendix for details of the preliminary reconciliation of 2017 results
2018 Guidance(1)
Midpoint 19.8%
2018 Guidance(1)
Midpoint
$2.8
$3.6
(2) (2)
$4.3
Drug Development Diagnostics
(4) Free Cash Flow represents Operating Cash Flow less Capital Expenditures in each of the years presented. See Appendix for non-GAAP reconciliation
(3) EPS, as presented, represents adjusted, non-GAAP financial measures (excludes amortization, restructuring and other special charges). See Appendix for non-GAAP reconciliation
89
2018 Guidance
(1) Calculated based on the preliminary restatement of revenue in 2017 related to the Company’s adoption of the new revenue recognition accounting standard (ASC 606) effective
January 1, 2018. See Appendix for additional details.
Metric Guidance
LabCorp Diagnostics Revenue Growth (1) 3.0% to 5.0%
Covance Drug Development Revenue Growth (1) 20.0% to 24.0%
Total Revenue Growth (1) 9.5% to 11.5%
Tax Rate 25%
Adjusted EPS $11.30 to $11.70
Free Cash Flow $1.1 to $1.2 Billion
Capital Expenditures 3.5% of Revenue
90
2018 Adjusted EPS Guidance Bridge (1)
(1) Adjusted EPS exclude amortization, restructuring charges and special items as well as a net benefit in the fourth quarter of 2017 of $5.00 per diluted share due to the implementation of the Tax
Cuts and Jobs Act. See Appendix for non-GAAP reconciliation
$7.00
$7.50
$8.00
$8.50
$9.00
$9.50
$10.00
$10.50
$11.00
$11.50
$12.00
2016 2017 Benefit from
Lower Tax Rate
Impact from PAMA
Implementation
Operating
Performance
2018
$8.83
$9.60
$1.30
($0.50)
$11.30 - $11.70 $0.90 - $1.30
9% - 14% adjusted EPS growth
in 2018 excluding the impact
from the lower tax rate and
implementation of PAMA
91
Disciplined Capital Deployment to
Build Shareholder Value
Approximately $11.5
Billion in Capital
Deployment Between
2013 and 2017
49%
25%
15%
11%
Covance Acquisition: $5.6 Billion
Other Acquisitions: $2.9 Billion
Share Repurchase: $1.7 Billion
Capital Expenditures: $1.3 Billion
92
Targeted Capital Expenditures that
Strengthen Capabilities and Support Growth
► Investments in 2018 to support future growth include:
• Capacity and automation for 23andMe collaboration
• Patient service centers in Walgreens stores
• Genomics and immunotoxicology capabilities in drug
development
• Expanded capacity in Raritan, New Jersey regional
laboratory, medical drug monitoring, and Shanghai
drug development facilities
► Investment in LaunchPad initiatives, such as
technology and automation
27%
46%
27%
Capital Expenditures (2014 to 2018 Est.)
Facilities
IT
Lab/Operations
$0
$100
$200
$300
$400
2014 2015 2016 2017 2018
3.0%
3.0%
3.0%
3.4%
3.5%
(2)
(1) Percent calculated based on the preliminary restatement of revenue in 2017 related to the Company’s adoption of the
new revenue recognition accounting standard (ASC 606) effective January 1, 2018. See Appendix for additional details.
(2) Based on the midpoint of revenue guidance issued on February 6, 2017
Capital Expenditures by Year
($ in Millions; % of Revenue)
(1)
93
Track Record of Acquisitions that Drive
Growth and a Differentiated Offering
Target Acquisition Criteria
• Businesses that leverage our core competencies
• Market leader
• Strong management team
• International presence
• Accretive to earnings and cash flow year 1
• Earn cost of capital by year 3
0.0x
1.0x
2.0x
3.0x
4.0x
$0
$200
$400
$600
$800
$1,000
$1,200
2013 2014 2015 2016 2017
94
Strong Balance Sheet Enables
Return of Capital to Shareholders
Debt and Leverage:
• Investment grade philosophy with targeted
leverage of 2.5x – 3.0x gross debt to EBITDA
• Strong liquidity including $1 billion in unutilized
revolving credit facility
• Attractive debt profile – ~80% is fixed interest
rate debt and ~75% of the debt matures in 2022
or later
Share Repurchases:
• Repurchased $1.7 billion over past five years
• Existing authorization to buyback up to $407.4
million in shares
• Expect to repurchase shares throughout 2018
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
4.0x
$0
$200
$400
$600
$800
$1,000
$1,200
2013 2014 2015 2016 2017
Share Repurchases
(In Millions) Leverage
Leverage
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
4.0x
$0
$200
$400
$600
$800
$1,000
$1,200
2013 2014 2015 2016 2017
Share Buyback
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
4.0x
$0
$200
$400
$600
$800
$1,000
$1,200
2013 2014 2015 2016 2017
Covance Acquisition
Date: Feb. 19, 2015
Leverage = 4.2x Chiltern Acquisition
Date: Sept. 1, 2017
Leverage = 3.5x
95
Key Takeaways
Multi-faceted platform for profitable growth through organic initiatives,
strategic acquisitions, and margin optimization
Track record of strong and reliable free cash flow,
and disciplined capital deployment
Execution of the LabCorp playbook
continues to generate long-term shareholder value
Appendix
Reconciliation of Non-GAAP Financial Measures
97
Adjusted EPS 2014 2015 2016 2017
Diluted earnings per common share 5.91$ 4.35$ 7.02$ 12.21$
One-time benefit from Tax Cuts and Jobs Act - - - (5.00)
Restructuring and special items 0.34 2.44 0.64 0.98
Amortization expense 0.55 1.12 1.17 1.41
Adjusted EPS 6.80$ 7.91$ 8.83$ 9.60$
Free Cash Flow:
Net cash provided by operating activities 739$ 982$ 1,176$ 1,459$
Less: Capital expenditures (204) (256) (279) (313)
Free cash flow 536$ 727$ 897$ 1,147$
(in millions, except per share data)
Twelve Months Ended
December 31,
98
Preliminary Reconciliation for the New Revenue
Recognition Accounting Standard (ASC 606)
Effective January 1, 2018, the Company adopted
the FASB-issued converged standard on revenue
recognition, using the full retrospective method.
Although the Company has not completed all of
the analysis required to finalize this restatement
of revenues and expenses relating to this new
standard, the table below presents the
Company’s current best estimate of the potential
financial impact on its two segments’ revenue,
and is being provided as a reference point for the
Company’s guidance in 2018. The 2017
calculation is preliminary and will be finalized
upon adoption in the first quarter of 2018 and
the amounts are therefore subject to change. The
Company does not believe the application of the
new standard will have any significant impact on
previously reported Adjusted Operating Income.
However, the change in reported revenue will
impact previously reported operating margins as
shown in the table provided.
(1) In LabCorp Diagnostics, the impact of the accounting change will reduce revenue and increase margins, as
bad debt will be treated as a reduction in revenue rather than selling, general and administrative expense
(2) In Covance Drug Development, the impact of this accounting change will increase revenue and cost of
revenue, resulting in lower margins due to the inclusion of investigator fees and other pass-through
expenses in both categories
(Dollars in millions)
As Reported Preliminary Restatement
LabCorp Diagnostics (1)
Net Revenue 7,170.5$ 6,858.0$
Adjusted Operating Income 1,446.3$ 1,446.3$
Adjusted Operating Margin 20.2% 21.1%
Covance Drug Development (2)
Net Revenue 3,037.2$ 3,562.4$
Adjusted Operating Income 422.4$ 425.7$
Adjusted Operating Margin 13.9% 11.9%
Consolidated (1) (2)
Net Revenue 10,205.9$ 10,418.6$
Adjusted Segment Operating Income 1,868.7$ 1,872.0$
Unallocated corporate expense (137.4)$ (137.4)$
Consolidated Adjusted Operating Income 1,731.3$ 1,734.6$
Adjusted Operating Margin 17.0% 16.6%
Twelve Months Ended
December 31, 2017
Twelve Months Ended
December 31, 2017
Lunch and Q&A